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You are here: BAILII >> Databases >> United Kingdom Upper Tribunal (Lands Chamber) >> ESSO Petroleum Company Ltd v Walker [2013] UKUT 52 (LC) (10 June 2013) URL: http://www.bailii.org/uk/cases/UKUT/LC/2013/RA_45_2011.html Cite as: [2013] UKUT 52 (LC), [2013] RA 355 |
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UPPER TRIBUNAL (LANDS CHAMBER)
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UT Neutral citation number: [2013] UKUT 52 (LC)
UTLC Case Number: RA/45/2011
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
RATING – hereditament – petrol filling station part of motorway service area – whether forming a separate hereditament – held that it was – paramountcy of occupation – held that petroleum company in paramount occupation – appeals allowed
IN THE MATTER OF TWO APPEALS AGAINST A DECISION
OF THE VALUATION TRIBUNAL FOR ENGLAND
and
TIMOTHY WALKER Respondent
(Valuation Officer)
Re: Maidstone Motorway Service Area
Junction 8 on the M20
Hollingbourne
Maidstone
Kent
ME17 1SS
Before: His Honour Judge David Mole QC and Mr N J Rose FRICS
Sitting at: 43-45 Bedford Square, London WC1B 3AS
on 28-29 January 2013
Neil King QC and Richard Turney, instructed by Bircham Dyson Bell LLP, for the Appellant
Daniel Kolinsky, instructed by HMRC solicitor, for the Respondent
The following cases are referred to in this decision:
North Eastern Railway Company v Guardians of York Union [1900] 1QB 733
Gilbert (VO) v S Hickinbottom and Sons Ltd [1956] 2QB 40
John Laing and Son Ltd v Kingswood Assessment Area Committee [1949] 1KB 344
LCC v Wilkins [1957] AC 362
Holywell Union Assessment Committee and Halkyn Parish v Halkyn District Mines Drainage Company [1895] AC 117
City of Westminster v The Southern Railway Company [1936] AC 511
Wimborne D C v Brayne Construction Co Ltd [1985] RA 234
Solihull Corporation v Gas Council [1962] 9RRC 128
Commissioner of Valuation for Northern Ireland v Fermanagh Protestant Board of Education [1969] 1 WLR 1708
The following cases were also cited:
R v St Pancras Assessment Committee (1877) 2 QBD 581
Trafford MBC v Pollard (VO) [2007] RA 49
RWE npower Plc v Cooper (VO) [2008] RA 257
R (Makro Properties Ltd) v Nuneaton & Bedworth BC [2012] EWHC 2250 (Admin)
3. It is agreed that, if the appeals fail, the existing rateable values of £715,000 for the 1 April 2005 assessment and £719,000 for the 15 November 2007 assessment should be confirmed. It is also agreed that, if the appeals succeed, the rateable values would be as follows:
(a) For the 1/4/2005 assessment, £230,000 for the petrol filling station and £337,500 for the remainder of the MMSA.
(b) For the 15/11/2007 assessment, £230,000 for the petrol filling station and £341,500 for the remainder of the MMSA.
Facts
From two agreed statements of fact and the evidence we find the following facts.
The site
11. The MMSA became operational in June 1997.
Restrictions on the use of the MMSA
12. Esso entered into a rentcharge deed with the Secretary of State for Transport dated 9 January 1997 which imposed covenants over the whole MMSA. The covenants were to provide:
(a) On opening, parking spaces for not fewer than 124 cars, 12 cars/caravans, 22 HGV and 12 coaches, and within 10 years of opening parking spaces for not fewer than 231 cars, 30 cars/caravans, 32 HGV and 12 coaches.
(b) Free toilet facilities in such number as may reasonably be required to provide for the annual average daily traffic flow from time to time on the motorway.
(c) Petrol, unleaded petrol and diesel fuel.
(d) A free picnic area.
(e) Access for emergency services and breakdown services.
(f) All these facilities are accessible to disabled people.
Department for Transport requirements
The operation of the amenity building and hotel
The operation of the petrol filling station
The Agency Agreement
The Operating Standards Handbook
Retailer Guide – The Operations Integrity Toolkit
22. The Toolkit explains in simple language what Roadchef should do in both ordinary and unusual circumstances. It is divided into 7 sections under the following headings:
(a) Managing health, safety and the environment
(b) Emergencies, accidents and incidents
(c) Day to day operations
(d) Maintenance, repair and electrical equipment
(e) Staff recruitment and training
(f) Community awareness
(g) Documents, records and schedules
Cashier Guide – The Operations Integrity Toolkit
23. This explains in simple language what Roadchef’s cashiers should do in ordinary and unusual circumstances. It is divided into three sections:
(a) Hazards on your petrol filling station e.g. petrol is flammable so do not smoke on the forecourt.
(b) Accidents and emergencies what to do e.g. dial 999. This has blanks for the insertion of site specific plans.
(c) Day to day activities e.g. in the morning lock the door behind you before turning off the intruder alarm.
Other features of the operation of the petrol filling station
25. Mr Brockfield inspects the petrol filling station on behalf of Esso at least once a quarter.
26. Roadchef is the holder of the petroleum licence issued by Kent County Council in respect of the petrol filling station. The petroleum licence sets out certain requirements, notably:
(a) Not to undertake any material alterations without written consent of the Authority (part 2.2.3).
(b) Report any incident such as fire or leak.
(c) Rules on dispensing and supply (part 3).
(d) Requirements for record-keeping for petroleum – spirit monitoring and a reconciliation system (part 4). Adequate records are to be kept of the maintenance regime and repairs carried out to tanks and pipework amongst other equipment (part 4,4.2).
Facilities at the petrol filling station at MMSA
Separate rateable values at other Major Road Service Areas (MRSAs) and Motorway Service Areas (MSAs)
Mr Brockfield’s evidence
Mr Sewell’s expert evidence
Mr Walker’s expert evidence
The valuation tribunal’s decision
51. The VT noted the clear division of title on the site and recorded the facts. It put particular emphasis on the Rentcharge Deed and the obligations it imposed upon Esso. The VT continued:
“81. However, in reviewing the evidence the Panel considered it was important to begin with the nature of the business on the Maidstone Motorway Service site and the primary use to which the property was being put. The rentcharge deed clearly indicates what must be provided in order to comply with that contractual obligation. From the facts of the case it was equally clear that neither Roadchef's leased area of land nor the Petrol Service Station area could deliver that obligation in isolation.
82. The motorway service area necessarily offers different facilities which are provided in different locations on site; the hotel, the amenity building, the parking and the petrol station all served the overall needs of the travelling public to differing degrees and in doing so, comply with the overall legal requirement set down by the Secretary of State to provide the required facilities and services. The Panel considered that where a primary purpose is identified one would not seek to assess individually all the different uses to which buildings are put. It is accepted that the petrol filling station was not contiguous to the amenity building however the Panel considered that there was a sufficiently high degree of functional connection for the Panel not to accept that the petrol filling station is capable of a separate letting in the context of the rentcharge obligation for the site.
83. In this scenario the Maidstone Motorway Service area is required to provide a set of facilities in order to operate as a motorway service station, and those facilities, however organised, cannot be provided by separate and isolated operations; each being functionally dependent on each other to provide a whole. Roadchef must provide provision for 24 hour fuelling, and give access to the petrol station over their land, the provision of petrol is integral to the site services; the level of parking and toilet facilities provided by the Petrol Filling Station site is inadequate to satisfy the requirements of the rentcharge deed and must depend on the use of the amenity building area. It is clear that the complex, while offering different services as required, must function as an integrated operation to meet its legal obligations under the rentcharge deed.”
52. The VT was therefore satisfied that the evidence supported only one unit of assessment on site and turned to consider the four tenets of rateable occupation. At paragraph 86 the VT said:
“86. The Panel considered that Esso's legal possession of the Petrol Station land is not, of itself, sufficient to make them actual occupiers. However, they had installed equipment and plant for the storage and delivery of the fuel and this would have given support to their claim to be in rateable occupation if Esso staff were employed on site; since this was not the case, the Panel considered that Esso were not making any actual use of the premises. The fact they provided the equipment to enable the business of selling fuel to be undertaken did not amount to the kind of actual use which the Panel believed necessary to make them rateable occupiers. Esso had never occupied the site in any ordinary sense, for the business of selling fuel to the public. They had provided the means to do so but had delegated this function to Roadchef for a commission and the quarterly visits by Esso's National Sales Manager could not constitute occupation.
87. Roadchef on the other hand had a substantial physical presence on the Petrol Filling Station site for which they held the Petroleum Licence and supplied the staff to process the fuel sales. The interchangeability of staff, although limited, did suggest that the site was managed as a single business by Roadchef; Roadchef maintained the area and equipment and managed the business on a day-to-day basis. Their presence was actual and ‘on the ground’ despite Esso's claim they were there because of an agency agreement. Esso had no direct presence other than through the plant and machinery which for the purposes of determining actual occupation was insufficient to weigh the argument in their favour. This was not a ‘master and servant’ situation since Roadchef were trading for themselves on the site while, at the same time, paying over the fuel receipts to Esso in exchange for their commission on sales.
88. The Panel accept that exclusive occupation does not mean that no one else has any rights in the premises. The case of Westminster City Council v Southern Railway Co. dealt with the general principle applicable to cases where there is occupation of parts of a larger hereditament and considered that the crucial question must always be ‘what, in fact, is the occupation in respect of which someone is alleged to be rateable and it was immaterial whether the title to occupy is attributable to a lease, licence or an easement’.
89. The Panel agrees that the fuel sales would be much higher than the general shop receipts but this was not the comparison to be made. The site was one unit of assessment and therefore the fuel sales should be considered in the light of the total income from all the facilities when it was likely the differential would have been much less. The Panel were of the opinion that the site as a whole was effectively occupied on a percentage of 80% Roadchef to 20% Esso and that put Roadchef in paramount occupation.”
Submissions
53. Mr King QC submitted that the petrol filling station should be assessed as a separate hereditament and the rating list altered accordingly. His main ground was that Esso was in rateable occupation of the filling station and Roadchef in rateable occupation of the remainder of the motorway service area but, alternatively, if the filling station was occupied by Roadchef it was occupied separately and should be treated as a separate hereditament. He put his argument that Esso was in rateable occupation of the filling station on two grounds: primarily that, while Roadchef and Esso were arguably both in occupation of the filling station, Esso's occupation was paramount to that of Roadchef; but secondly, that if Roadchef was in fact in paramount occupation, that occupation was in its capacity as Esso's agent.
54. There were factual considerations on both sides of the debate as to who was in paramount occupation of the filling station. That question had to be answered by considering the area of the filling station. The VT seems to have made the mistake in paragraph 89 of its decision of considering paramountcy in relation to the whole site, rather than simply the petrol filling station. In Mr King's submission, it could not be doubted that both Esso and Roadchef were in actual occupation of the filling station.
55. Esso was the freehold owner of the land and buildings of the petrol filling station, the fuel tanks, the forecourt and all its equipment and everything necessary for the purpose of selling fuel. All the visible equipment and buildings were designed, coloured and badged to convey the message that this was an Esso filling station. Esso had a right of way and parking for its customers over the rest of the motorway service area. Roadchef simply owned the stock in the shop. At the relevant dates the supply and storage of fuel was almost entirely organised by Esso and carried out by its delivery contractors, save that Roadchef employees had a role to play in putting out the keys and relevant documentation for the drivers. They also had an important function in the day-to-day supervision of the forecourt and its safety, albeit in accordance with Esso's standing instruction. Roadchef's involvement in fuel sales was minimal: in the case of cash sales Roadchef employees took the cash and then accounted for it to Esso but in the case of card sales, by far the greatest proportion, the takings went straight to Esso.
56. Mr King submitted that the authorities established that control is the essential feature by which paramountcy is to be discerned. He agreed that how occupation and control was manifest on the ground was very important. The labels given to the documents from which rights to occupy were derived, whether a "lease" or a "licence", were of little or no relevance. But control was such an important consideration that significant regard must be paid to the substance of those documents so far as they showed who was in control of the occupation of the hereditament. In this case an examination of the various documents made it plain that Esso had created a situation where the petrol filling station was set aside from the rest of the service area. In the rest of the area Roadchef was in control and occupation but within the area of the petrol filling station, although Roadchef was arguably in occupation, it was plain that Esso intended to and did retain paramount control. There was a clear division of purpose between the petrol filling station and the areas occupied by Roadchef.
57. In support of that submission Mr King pointed first to the Retail Motor Fuels Agency Agreement, dated 2 December 2003, clause 2.2, by which Roadchef (the "agent") was appointed to be Esso's "agent for the sale of Motor Fuels from the Service Station”, granted "permission to operate the Esso Shop and any other facilities at the Service Station authorised in writing by Esso" and was permitted to use and have a right of access to the service station and equipment for those purposes only. The obligations of the rentcharge were reflected in the agreement.
58. Subsequent clauses in the agreement made it clear that no tenancy nor any proprietary interest was created in the premises or equipment. Roadchef undertook not to impede the employees agents or contractors of Esso "in the exercise by them of Esso's right of possession and control of the Service Station and/or the Equipment". This meant, submitted Mr King, that Esso's personnel could come at any time and go anywhere and was a significant right. Roadchef was obliged to keep the service station open 24 hours a day, every day unless otherwise instructed by Esso; it was required to accept deliveries of fuel, to store and offer the fuel for sale and sell it as Esso's agent and to hold a Petroleum Licence. It was to do this to Esso's standards in accordance with its Handbook and Operations Integrity Toolkit (OIT), which was incorporated as part of the agreement. The staff were to be employed by Roadchef. Roadchef was to ensure that they were trained in accordance with Esso's standards as set out in the Handbook and OIT. Roadchef was to be paid a fee calculated in accordance with the forecasts prepared in the remuneration term sheet.
59. There was some examination in evidence of the remuneration term sheet and its significance or otherwise and of the degree to which Esso, rather than Roadchef, took the burden of financial risk arising from the operation of the petrol filling station. Mr King argued that the system of a fee based on remuneration term sheets indicated a high degree of control by Esso. The only financial risks not underwritten by Esso were those that would be a reflection of failures by the agent.
60. The petroleum licence was held by Roadchef, in accordance with the agreement, but on examination it appeared that the responsibilities of it were largely for Esso to meet. Roadchef had certain obligations that could only be carried out by the people actually on the premises such as the recording and control of some incidents, and ensuring that neither operating attendants nor purchasers of petroleum spirit would be under the specified ages. On the other hand only Esso would be in a position to deal with actual or suspected leaks of its tanks dispensers and pipework and would be responsible for most of the record-keeping obligations.
61. A vapour release permit was also necessary and this was held by Esso in order to authorise the unloading and storage of petrol into and at the filling station. The conditions of this document required the supervision of a "competent person" during unloading. That person would be responsible for several conditions relating to safe operation and, in practice, at the appeal filling station, the competent person would be the delivery driver. Other conditions, such as testing lines and valves and the maintenance of a logbook of all maintenance examination and testing were the responsibility of Esso.
62. The stocking and staffing of the filling station and its shop were the subject of close examination. It was acknowledged that the overall day-to-day management of the petrol filling station was the responsibility of the Road Chef managers of the rest of the service area but the staff of the filling station had to be specially trained in accordance with Esso's requirements. Subject to the training requirement there was the potential for some "crossover" between the filling station and the rest of Roadchef's facilities but there was little evidence that much if any of it had actually happened. The staff wore Roadchef uniforms but with Esso badges. When repairs had to be carried out, subject to Roadchef's ability to order minor repairs without consultation, it was ultimately Esso which would select and pay a contractor although it was acknowledged that the Road Chef managers might have a role in contacting those contractors in the first instance and recommending them to Esso.
63. The conclusion Mr King urged was that, as a matter of fact, it was clear from the whole picture that control of the petrol filling station site was quite separate from control of the rest of the motorway service area and was in the hands of Esso. It was Esso who was in paramount occupation in the area it occupied which was a separate hereditament.
64. In the alternative, Mr King argued that the facts demonstrated that Roadchef was simply Esso's agent and Esso occupied the separate hereditament through Roadchef. Even if this were not so, it was at least clear that the petrol filling station satisfied the tests on the authorities of being capable of being a separate hereditament and plainly served a distinctly separate purpose.
65. Mr Kolinsky began his submissions by setting out two guiding principles: firstly the decision should be made in the light of the facts on the ground and secondly it should be made in the light of the way the service station is in fact operated and occupied and not how it might be operated and occupied. He addressed the four ingredients of rateable occupation and submitted that it was clear that Roadchef was in actual occupation of the service station and all the rest of the motorway service area. It was also clear from the authorities that the service station and the rest of the MSA could be more than one hereditament but what they could be was not helpful; the issue was whether the service station was actually a separate hereditament. Mr Kolinsky considered the judgement of Lord Russell in the Westminster case. He acknowledged that the legal arrangements were of some relevance but the real question was how they manifested themselves in control on the ground. On the basis of Mr Walker's evidence it was easy to see why Roadchef was in occupation; Roadchef employees were on the site all the time and the day-to-day management of both the shop and the petrol filling side of the business was in its hands. A suite of statutory responsibilities in relation to the petrol filling station fell upon the Roadchef employees as a result of the petroleum licence being held by Roadchef. In addition many duties were cast upon that company by the agency agreement and the handbook and OIT. Roadchef conducted the sales. It played some role in the fuel deliveries. There was some interchangeability of staff and stock.
66. Questions of financial risk had been examined but they were of less importance to control than what was happening on the ground. In any event, it was not right to say that Esso shouldered the whole of the risk of the service station operation. In essence the full function of the motorway service area needed to be delivered, which included the element of the service station. Both elements were operated as an integrated whole by Roadchef. Roadchef was in occupation. The Valuation Tribunal appear to have doubted whether Esso was in occupation at all. Even if Esso did have an element of occupation, the facts on the ground showed that Roadchef was in paramount occupation.
67. It was much harder, said Mr Kolinsky, to see why Esso was in occupation. The Esso equipment and brand was there, as was Mr Brockfield on infrequent occasions, but branding was an uncertain indicator. The fuel deliveries could not be taken as a manifestation of actual occupation. The petrol filling station was a retail facility not a storage one. The VO's judgement that Roadchef was in paramount occupation, if Esso was in occupation at all, was the correct one. What happened on other motorway service areas was of little assistance. There was no doubt that matters might have been arranged differently so that Esso was clearly in occupation but it had not been done that way.
68. Mr Kolinsky submitted that the appellant's argument based on agency was a long shot. The authorities were clearly against agency having a role in rateable liability. Attention should be paid to the substance rather than the form. The substance was that Roadchef occupied the petrol filling station.
69. As for the argument that there was in any event a separate hereditament, even if it was occupied by Roadchef, the answer was that it was not accurate to regard the petrol filling station as being occupied for a different purpose from the rest of the site. The sale of fuel was simply part of and integrated with the provision of services to the travelling public. The sale of fuel was not a separate purpose. There might have been a separate occupier, but once the position was reached that Roadchef was the occupier of both the filling station and the rest of the MSA, it was unrealistic to submit that there were, nonetheless, two hereditaments.
The law
70. The authorities concerning the decision whether premises amount to one hereditament or multiple hereditaments make it plain that the answer depends upon the facts on the ground. The leading case of North Eastern Railway Company v Guardians of York Union [1900] 1 QB 733 concerned the extensive premises of the North Eastern Railway. It was argued that the premises were made up of several different hereditaments including, for example, the railway lines, York station, the engine sheds and so on. It was agreed that the Station Hotel and refreshment rooms would be treated as a separate hereditament. Channell J said (at page 739) that whether the separate parts of the railway undertaking were one hereditament was normally a question of fact. He continued:
"One thing I think is clear, that property must be rated according to what it is, and not according to what it might be. You may have a thing which, as it is, is one hereditament, but which is quite capable of being made into two."
He recorded that the court had not been asked to give any opinion about the hotel but said that, speaking for himself he would have been inclined to find that it should be separately rated.
"In arriving at that conclusion I should be influenced by the fact that the hotel and the rest of the railway station are used for wholly different purposes. It would be like the case of a man occupying two shops, in one of which he carried on one business, and in the other another business."
71. The Court of Appeal followed North Eastern Railway in Gilbert (VO) v S Hickinbottom and Sons Ltd [1956] 2 QB 40 where (at p.51-52) Morris LJ said:
"It was submitted that if premises are in the same occupation and if they are contiguous, or if they are within the same curtilage, then prima facie they are to be regarded as one hereditament; but that in such circumstances a distinct and separate user of some part of such premises may justify regarding that part as a separate hereditament. The case of the hotel at York station in the case cited was given as an example. But it was submitted that if premises which are in the same occupation are structurally and geographically separate and if they are capable of being separately let, then the use to which the premises are put must be entirely excluded from consideration and the premises must be held to be separate hereditaments.”
72. Morris LJ said that he did not feel able to accept that approach nor to try and lay down particular considerations as being either relevant or not relevant. It was a question of fact where, in borderline cases it was better to employ a commonsense assessment of the features of the case than to have recourse to some standard formula. He gave several illustrations and (at p.52) continued:
"There can be no doubt that ordinarily very great weight will be placed upon what may be termed the geographical test. But the question is always one of fact and degree. On the other hand, where there are several buildings within one enclosure or curtilage, they may constitute separate hereditaments. This may be so because the buildings are separately let. It may also be so if the buildings, though not separately let, are capable of being separately let and are used for separate purposes. (See North Eastern Railway Co v York Union.)"
73. Parker LJ listed the considerations as to whether or not premises in one occupation fell to be entered as one or more hereditaments. He recorded the stress that was traditionally placed upon the geographical relationship and (at p. 54) said:
"this test is so often decisive that it is a convenient starting point to the enquiry, but it is not decisive in all cases. Thus, though the premises may form a geographical unit, the manner in which different parts are used may justify the premises being treated as several hereditaments."
74. Once the hereditament is identified, as a matter of fact, the question who is in occupation of it arises. The four ingredients of rateable occupation have long been recognised as: firstly, there must be actual occupation; secondly, there must be occupation exclusive for the particular purposes of the possessor; thirdly, the possession must be of some value or benefit to the possessor; and fourthly, the possession must not be for too transient a period. (John Laing and Son Ltd v Kingswood Assessment Area Committee [1949] 1KB 344; LCC v Wilkins [1957] AC 362). The requirement that occupation must be exclusive has given rise to the mistaken suggestion that there could not be two simultaneous occupants. This misconception was laid to rest by the House of Lords in Holywell Union Assessment Committee and Halkyn Parish v Halkyn District Mines Drainage Company [1895] AC 117. A landowner granted a drainage company the right of drainage through a tunnel and watercourse in his land, reserving to himself a number of other rights. Lord Herschell said (at page 126):
"It was strongly contended , on behalf of the respondents, that they could not be liable to rated, inasmuch as they were not in exclusive occupation. There are many cases where two persons may, without impropriety, be said to occupy the same land, and the question has sometimes arisen which of them is rateable. Where a person already in possession has given to another possession of a part of his premises, if their possession be not exclusive he does not cease to be liable to the rate, nor does the other become so. A familiar illustration of this occurs in the case of a landlord and his lodger. Both are, in a sense, in occupation, but the occupation of the landlord is paramount, that of the lodger subordinate.
In the present case, in my opinion, on the true construction of the deed, the possession of the respondents is paramount, and any rights which the Duke has are subordinate. The respondents alone have the right of using the tunnels for the primary purpose for which they have been constructed. The Duke has no such right, and in my opinion, the respondents are in occupation of the tunnels and works."
75. City of Westminster v The Southern Railway Company [1936]AC 511 concerned the bookstalls, chemists shop, kiosks, hairdressing salons and other premises within Victoria Station. The issue was whether these stalls, kiosks and shops were separate hereditaments or simply part of the railway hereditament. Lord Russell made several general observations about rateable occupation and then (at p. 529) he turned to the situation where there was more than one occupant:
"Where there is no rival claimant to the occupancy, no difficulty can arise; but in certain cases there may be a rival occupancy in some parts who, to some extent, may have occupancy rights over the premises. The question in every such case must be one of fact -- namely, whose position in relation to occupation is paramount, and whose position in relation to occupation is subordinate; but, in my opinion the question must be answered in regard to the position and rights of the parties in respect of the premises in question, and in regard to the purpose of the occupation of those premises. In other words, in the present case, the question must be, not who is in paramount occupation of the station, within whose confines the premises in question are situate, but who is in paramount occupation of the particular premises in question."
76. After a discussion of some of the authorities he said (page 532):
"In truth the effect of the alleged control upon the question of rateable occupation must depend upon the facts in every case; and in my opinion in each case the degree of the control must be examined, and the examination must be directed to the extent to which its exercise would interfere with the enjoyment by the occupant of the premises in his possession for the purposes for which he occupies them, or would be inconsistent with his enjoyment of them to the substantial exclusion of all other persons.
Before I turn to a consideration of the particular premises in Victoria Station (or some of them) which are here in question, let me say at once that I regard the forms of the documents under which they are ‘let out’ as of small importance. There can I think be no doubt that a view once prevailed that in order to constitute rateable occupation it was necessary that the occupier should be in the position of a tenant of the land and that a mere licence to occupy or a title to occupation in virtue of a right in the nature of an easement was not enough. Further, although authorities have established that the existence of a tenancy was not necessary, but that rateable occupation could exist in one who occupied only by virtue of a licence or easement, the old error still prevailed at times."
77. After giving an example Lord Russell went on (at page 533) to say:
"In my opinion the crucial question must always be what in fact is the occupation in respect of which someone is alleged to be rateable, and it is immaterial whether the title to occupy is attributable to a lease, a licence, or an easement."
He stressed again (at page 537) that "rateability does not depend on title to occupy, but on the fact of occupation."
78. In Wimborne DC v Brayne Construction Co Ltd [1985] RA 234, Lloyd LJ remarked (at p. 243) that :
"I found some difficulty during the argument in understanding how the requirement that occupation must be exclusive could be reconciled with the well established rule that where there are two competing occupiers of the same hereditament, it is the paramount occupier who is rateable. If there are two occupiers of the same hereditament, how can either be exclusive?
...
Another way of explaining the difficulty might be that an occupier, in order to qualify for rateable occupation, has only to be in exclusive occupation for his own particular purposes. This does not exclude others from occupying the same hereditament for their particular purposes. Paramountcy is a way of choosing between exclusive occupiers in that sense. The degree of control exercised by one occupier over the other, or by a third party, seems to be relevant to both questions -- that is to say, to whether an occupier is in exclusive occupation for his own particular purposes, and also to which of two competing occupiers is in paramount occupation."
79. The distinction between control and agency was addressed by Lord Reid in the case of Solihull Corporation v Gas Council [1962] 9 RRC 128 at 132 in these words:
"Moreover, agency throws little light on rateable occupation. A man's sole business might be buying produce as agent for a particular principal, but the premises where he handled the produce for that reason would not be occupied by the principal.
I think that the Lands Tribunal must have had in mind the question: who was in control? ‘Agent’ is sometimes rather loosely used to denote a person who, though not a servant, has obliged himself to accept a measure of control comparable with the control exercisable by a master over a servant - a person who is merely the hand of his ‘principal’. What I think that the tribunal must have meant was that the arrangements between the board and the council gave such a degree of control of the hereditament to the council. I do not doubt that an owner of property could so subject himself to the control of another that that other person could be held to be the occupier, although he never was present on the property and exercised his control solely by giving orders to the owner. But any such arrangement must be rare and counsel were unable to find any reported English case where that had been done."
80. In the case of Commissioner of Valuation for Northern Ireland v Fermanagh Protestant Board of Education [1969]1 WLR 1708 Lord Diplock made a similar point when he said (at page 1731H):
"Although a licence to make use of premises for some purposes may be so qualified as to reserve to the licensor sufficient control of their day to day use as to amount to continued occupation by the licensor (see Byrne v City of Dublin Steam Packet Company 12 LR Ir 220) a licence to occupy premises as a "dwelling-house" prima facie transfers the "occupation" of the dwelling-house to the licensee, for it is inconsistent with the reservation of the day to day control of its use by the licensor."
Consideration and decision
81. Our starting point is to consider whether as a matter of fact and degree the area of the petrol filling station is capable of being a separate hereditament. The fact that the land is held by Esso, its owner, and not leased to Roadchef, in contrast to the remainder of the MMSA, is not without significance although it is certainly not conclusive. Morris LJ noted in Gilbert v Hickinbottom that one or several buildings within a curtilage might be a separate hereditament because it was separately let. It is relevant to consider the nature of the rights under which occupation is achieved by both Esso and Roadchef. That is not contrary to authority. When Lord Russell said, in Southern Railway, that it was "immaterial whether the title to occupy is attributable to a lease, a licence or an easement” he did not mean, in our opinion, that the nature of the title to occupy was irrelevant. That is made plain by the earlier paragraphs of his judgement. He said that the question of paramountcy is to be answered having regard to “the position and rights of the parties in respect of the premises in question.” What he meant was that the "forms of the documents", in the sense of the names or classification of those documents, is not of significance. But the nature and attributes of the title to occupy which the documents of title grant is certainly very relevant. In Holywell Union Lord Herschell looked to the " true construction of the deed" in order to reach the conclusion that the possession of the respondents was paramount. It is right that “rateability does not depend on title to occupy but on the fact of occupation” but that does not mean the title to occupy is irrelevant. An essential fact of occupation is the relative position of the parties and the rights under which each party occupies. That may well, in turn, depend on the “title” to occupy, however lawyers would label that title. In our view the respective rights of the occupying parties form an essential part of the factual setting.
82. The land of the filling station is separately retained by Esso, the landlord of the rest of the MSA site. It is evident that Esso has arranged the land holding in order to further its own business interests. Esso's primary business interest is the selling of fuel. On the land that Esso has retained it has built its own buildings and equipped them as is necessary for a filling station. There are substantial fuel tanks and fuel pumps and other equipment laid out under a canopy necessary for a modern filling station. There is a shop at which payment is made for both fuel and for a range of other goods. The retained area has all the rights of way over the leased land it needs for itself and customers and has full rights of passage for its services. Esso’s agent Roadchef carries out the process of selling fuel and accounting to Esso for the proceeds, substantially under Esso’s direction. We find that Esso occupies the retained land for its purposes.
83. Although within the boundary of the motorway service area as a whole, the oval area of the filling station is geographically separate from the rest of the uses on the MSA. It is for an identifiably distinct use although, of course, it is correct to recognise that it is a use that is an essential part of the motorway service station facility that Esso is obliged by the rentcharge deed to provide.
84. Roadchef performs the function under the agency agreement of arranging most of the day-to-day running of the fuel station and it is its staff that is on the ground. The day-to-day management of the filling station is in the hands of Roadchef. Therefore we find that Roadchef occupies the site for its purposes. So we conclude that this is a case where there are two actual occupants of the retained land and it is essential to turn to the question, which of the two occupiers of that land is paramount? (The question is not, as the LVT seems to have thought, which of the two is paramount in the MMSA as a whole. See LVT decision, paragraph 89.)
85. It is clear to us from the authorities that the essential factual test of paramountcy is control. Control depends on the facts of the case. As Lord Russell said "the degree of the control must be examined, and the examination must be directed to the extent to which its exercise would interfere with the enjoyment by the occupant of the premises in his possession for the purposes for which he occupies them or would be inconsistent with his enjoyment of them to the substantial exclusion of all other persons."
86. An examination of the degree of control exercised by Esso on the one hand and Roadchef on the other seems to us to lead to only one conclusion.
87. To what extent does Esso's degree of control interfere substantially with the occupation of the premises by Roadchef for the purposes for which Roadchef occupies them? On this point we find the factual analysis put forward by Mr King to be compelling. Roadchef occupies the premises in order to run the shop and take a profit from it and to supervise the petrol filling business. The control of the way it supervises the petrol filling business is detailed and comparatively strict. Esso's control over the way that the shop is run by Roadchef, although more lax, is still notable. Roadchef is required to stock certain items and not to stock others. The Roadchef staff must have specialist training for the proper care of the refuelling function in accordance with Esso's Handbook and OIT. The Roadchef staff wears Esso badges. Roadchef’s power to undertake alterations or even maintenance and repairs to the fabric of the buildings and equipment is strictly limited. The agency agreement gives Esso the power to come and go at will.
88. To what extent does Roadchef's degree of control interfere substantially with the occupation of the premises by Esso for the purpose for which Esso occupies them? The answer is, hardly at all. The Roadchef staff is on site everyday, occupying it and doing the work. Who it is that is doing the work and is physically present and in immediate control of the site is obviously a relevant matter but it is not conclusive. The whole purpose of the agency agreement, Handbook and OIT is to ensure that the occupation by Roadchef and its staff helps achieve the purposes for which Esso occupies the premises. The day-to-day on the ground occupation by Roadchef staff and managers cannot be said to interfere substantially or at all with Esso's purpose since it is the method by which Esso achieves that purpose. It is not unusual for an occupant not to exercise physical control personally. Indeed in the case of a corporate body control can only be exercised through human agents. The physical manifestation of control, and thus occupancy, may be through an individual owner or lessor, family members, the directors of the company, partners, employees and even, in the right (and probably unusual) circumstances, agents or contractors engaged for that purpose. It does not seem to us that there is any principle in the authorities that would prevent an occupant from exercising control for his purpose through an agent or separate contractor, if that is what he wishes to do. The true nature of the occupation must be examined.
89. A lack of constant interference in the day to day running of the business does not equate to lack of control. The best and most effective control may be where the person in control hardly needs to intervene at all, having established a stable and compliant system. As Mr Brockfield said, he does not go to the MMSA frequently because he does not have to. It is well run by Roadchef on behalf of Esso to its satisfaction. If it had not been, the day-to-day presence of Esso's staff would have been significantly increased as would their direct physical intervention. But that would have been a manifestation of less than perfect control rather than the opposite.
90. The factors that suggest Esso is in paramount control start with the contrast in control between the leased area and the retained area. Esso has direct control of most of the essential functions in the retained area. Fuel deliveries are extremely important and Esso ensures compliance with the unloading permit. Of course the storage of fuel is not an end in itself, but it is the means to the end of efficiently selling as much fuel as possible and as such is an essential part of the retailing operation. Esso requires adequate amounts of the proper sort of fuel in its tanks in just the same way that Roadchef requires the right goods on its shelves and in its store at the back of the shop. To that end Esso exercises as much control as is necessary. It holds the fuel vapour permit. It fulfils most of the important obligations that are imposed by the petroleum licence that Roadchef holds. Roadchef is left with a degree of apparent autonomy because Roadchef is trusted to run the operation as Esso (not Roadchef) wants it run.
91. In our judgement, as a matter of fact and degree, Esso is in paramount occupation of the petrol filling station element of the MSA. It follows that we conclude firstly that the petrol filling station is a separate hereditament and secondly that the occupant of that hereditament is Esso. In the light of that finding it is unnecessary to decide the agency point.
Result
92. The appeals are allowed. We direct that the existing assessments of the Maidstone Motorway Service Area and Premises in the 2005 rating list be deleted and replaced with the following assessments:
With effect from
1 April 2005 15 Nov 2007
Motorway Service Area excluding petrol filling station £337,500 £341,500
Motoring Service Area petrol filling station £230,000 £230,000
93. A letter concerning costs accompanies this decision, which will become final when the question of costs is determined.
Dated: 7 March 2013
His Honour Judge David Mole QC
N J Rose FRICS
Costs Addendum
Dated: 10 June 2013
His Honour David Mole QC
N J Rose FRICS
Member